The Hindu Business Line : Pvt sector to be allowed 30 pc `set off' on defence tech imports

The set off insists that any defence procurement made by an Indian company would require that the Indian procurer manufacture at least 30 per cent of the inputs of that equipment/machine.

OPENING UP: The Defence Minister, Mr Pranab Mukherjee, and the former West Bengal Governor, Mr Viren Shah, at a press conference in Mumbai on Sunday. — Shashi Ashiwal

Mumbai , Sept. 4

THE Indian private sector will be allowed a minimum `set off' of 30 per cent on imports of over Rs 300 crore of defence technology.

This change in the defence procurement policy made in June this year is in accordance with the Kelkar Committee recommendations on how the Indian private industry can work with defence public sector units and defence factories in manufacture, said the Union Minister for Defence, Mr Pranab Mukherjee, in his address to the Indian Merchants' Chamber on Sunday.

This change also sits well with the recent agreement between the US and India on defence matters. The US has decided that it will not stand in the way of its private industry transferring defence technology to India, he said.

This `set off' will encourage the private sector to participate in defence technology procurement.

The exact details of the set off which is being granted, as well as details on collaborative relationships between defence laboratories and private industry will be made clear and put up on the Defence Ministry Web site, he said.

Broadly, the set off insists that any defence procurement made by an Indian company would require that the Indian procurer manufacture at least 30 per cent of the inputs of that equipment/machine. It could be more than 30 per cent, but that would be decided on a case-by-case basis.

Without the set off, Indian industry would have had to show exports - commonly of commodities - against the imports they would be making.

Of the 40 recommendations of the Kelkar Committee, an `empowered group of officers' examining them has accepted 21 in toto and 5 with modifications; it has made alternative suggestions with respect to the remaining 15, said the Minister.

After this, the Union Cabinet would have to approve of it following which there would be an open house discussion with stakeholders and participants, said Mr Mukherjee.

The 39 ordnance factories reported a turnover of Rs 11,120 crore last year, and the 8 defence public sector units a turnover of Rs 6,500 crore.

The Committee recommendations will allow the Indian private sector to take part in defence production in a better manner, said Mr Mukherjee. Currently 23 Indian licences and letters of intent have been issued to private companies for defence manufacture, but actual manufacture of this kind has not happened in a big way.

Indian companies could `buy' technology `buy-and-make' or `make'. The private sector can play a major role in the `buy-and-make' area, he said.

Currently India is among the top 10 arms purchasers in the world although its defence spend is less than 3 per cent of GDP and between 16 per cent and 17 per cent of budgetary allocation.

This year's defence budget is Rs 83,000 crore of which Rs 35,000 crore will be spent on capital acquisition, a large part of which will go towards procurement.

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